THE IMPACT OF THE DIVERSITY CLIMATE ON THE TRANSFER OF TACIT KNOWLEDGE IN THE SOUTH AFRICAN FINANCIAL SECTOR potx

THE IMPACT OF THE DIVERSITY CLIMATE ON THE TRANSFER OF TACIT KNOWLEDGE IN THE SOUTH AFRICAN FINANCIAL SECTOR KUBENDRIE LINDA AIYER A research proposal submitted to the Gordon Institu

THE IMPACT OF THE DIVERSITY CLIMATE

ON THE TRANSFER OF TACIT KNOWLEDGE

IN THE SOUTH AFRICAN

FINANCIAL SECTOR

KUBENDRIE LINDA AIYER

A research proposal submitted to the Gordon Institute of Business Science, University of Pretoria, in partial fulfilment of the requirements for the degree

of Master of Business Administration

November 2006

ABSTRACT

South African businesses are faced with the immense challenge of transforming themselves so as to reflect post-apartheid South Africa, while at the same time remaining competitive within a globalised market This research project set out

to establish how organisations could effectively channel the potential of an increasingly diverse workforce to derive positive outcomes for the individual and the organisation To this end, the organisational approach to diversity and its ability to influence the extent of knowledge transfer has been examined

In fully exploring this relationship, four research propositions were developed A quantitative approach in the form of a survey was utilised to ascertain the perceptions of employees within the banking sector in South Africa The qualitative phase of the research entailed in-depth interviews with subject matter experts within the industry This was primarily used to corroborate the survey responses, and to document original thought within the scope of this research The data obtained through these research instruments was analysed

to ascertain the strength of the diversity climate and knowledge transfer as business enablers

The results revealed that a positive diversity climate yields greater levels of knowledge sharing, which consequently results in positive career outcomes for the employee These factors in aggregate produce both tangible and intangible benefits for the organisation A conceptual framework has been proposed that depicts the key linkages established through the research findings

I declare that this research project is my own work It is submitted in partial fulfilment of the requirements for the degree of Master of Business Administration at the Gordon Institute of Business Science, University of Pretoria It has not been submitted before for any degree or examination in any other University

KUBENDRIE AIYER

November 2006

DEDICATION

To my husband, Sandeeran, whose support, encouragement, patience, and most of all love, had given me the strength to persevere through all those stressful moments during these two years

ACKNOWLEDGEMENTS

I would like to extend my sincere gratitude to the following individuals:

̇ My supervisor, Colin Rowley, for his support, encouragement and guidance on this research project I am exceptionally thankful for his assistance

̇ My friends, Sarita, Vasinthee and Jeetesh for their constant support throughout the MBA They have given me strength whenever I needed it

̇ All my friends and family for their understanding and motivation

TABLE OF CONTENTS

ABSTRACT II

DECLARATION III

DEDICATION IV ACKNOWLEDGEMENTS V

LIST OF TABLES AND FIGURES X

GLOSSARY XIII

CHAPTER 1 – DEFINITION OF THE RESEARCH PROBLEM 1

1.1 Introduction 1

1.2 Motivation for research 3

1.3 Research Problem 8

CHAPTER 2 – LITERATURE REVIEW 9

2.1 The South African Financial Services Industry 9

2.1.1 Introduction 9

2.1.2 Industry challenges and drivers of transformation 9

2.2 Improving organisation strategic performance 12

2.3 Diversity defined 14

2.3.1 The Diversity Climate 16

2.4 Organisational Knowledge 25

2.4.1 Tacit knowledge defined 27

2.4.2 Modes of Knowledge Conversion 28

2.4.3 Knowledge Transfer 29

2.5 The relationship between employee motivation and knowledge transfer 35

2.6 Organisational benefits from knowledge management processes 37

2.7 The relationship between diversity management and knowledge sharing 38

CHAPTER 3 – RESEARCH PROPOSITIONS 42

CHAPTER 4 – RESEARCH METHODOLOGY 44

4.1 Introduction 44

4.2 Research Paradigm 44

4.3 Quantitative Research Methodology 47

4.3.1 Population of relevance 47

4.3.2 Sampling Method and Size 48

4.3.3 Data Collection 49

4.3.4 Data Analysis 51

4.3.5 Research Limitations 53

4.4 Qualitative Research Methodology 53

4.4.1 Population of Relevance 54

4.4.2 Sampling Method and Size 54

4.4.3 Data Collection 55

4.4.4 Data Analysis 56

4.4.5 Research Limitations 57

4.5 Conclusion 57

CHAPTER 5 - FINDINGS 58

5.1 Introduction 58

5.2 Profile of the sample group 58

5.2.1 Quantitative phase 58

5.2.2 Qualitative phase 63

5.3 Presentation of findings 65

5.3.1 Research Proposition 1 – The Diversity Climate 65

5.3.2 Research Proposition 2 – The relationship between the diversity climate and the sharing of tacit knowledge 76

5.3.3 Research Proposition 3 – The impact of a positive diversity climate and knowledge sharing on individual career outcomes 85

5.3.5 Research Proposition 4 – Tangible and intangible benefits to the

organisation 87

CHAPTER 6 – DISCUSSION OF RESULTS 93

6.1 Introduction 93

6.2 Research Proposition 1 – Nature of the diversity climate 93

6.3 Research Proposition 2 – The relationship between the diversity climate and the sharing of tacit knowledge 98

6.4 Research Proposition 3 – Individual career outcomes 102

6.5 Research Proposition 4 – Tangible and intangible organisational benefits 105

CHAPTER 7 - CONCLUSION 110

7.1 Conceptual model 110

7.2 Recommendations 116

7.3 Future Research 118

7.4 Conclusion 119

REFERENCES 120

APPENDICES

Appendix 1 135

Appendix 2 136

Appendix 3 137

Appendix 4 138

Appendix 5 140

LIST OF TABLES AND FIGURES

C HAPTER 1

Figure 1.1 – Tacit versus explicit knowledge 7

C HAPTER 2 Table 2.1: Eight ‘S’ Model 13

Figure 2.1: Spheres of Activity in the Management of Cultural Diversity 16

Figure 2.2: Climate for Diversity Model 19

Figure 2.3: Framework relating Workgroup Diversity to Organisational Performance 21

Figure 2.4: Relationship between Cultural Diversity and Work Group Functioning 22

Figure 2.5: Interactional Model of Cultural Diversity 24

Figure 2.6: Ontological Diagram of Organisation Knowledge 26

Figure 2.7: Multidimensional Structure of Tacit Knowledge 136

Figure 2.8: SECI Model Error! Bookmark not defined Figure 2.9: Integrative Framework of factors influencing Knowledge Sharing 32

Figure 2.10: Influences of Cultural Diversity on Management 40

C HAPTER 4 Table 4.1: A Comparison between Quantitative and Qualitative Research 45

C HAPTER 5 Table 5.1: Organisational affiliation of the sample group 58

Figure 5.1: Race profile of respondents 59

Figure 5.2: Job category representation 60

Figure 5.3: Job segmentation per race group 60

Table 5.2: Gender representation 61

Figure 5.4: Split of gender by race 61

Table 5.3: Tenure in organization 62

Figure 5.5: Tenure by race split 62

Figure 5.6: Education level of respondents 63

Table 5.4: Organisational affiliation and designation of the sample group 64

Table 5.5: The diversity climate – Individual-level experiences 66

Figure 5.7: Responses to Q12 67

Table 5.6: Factors that could improve the diversity climate – Individual experiences 67

Table 5.7: Organisational effort/ initiatives 68

Table 5.8: The diversity climate – Group dynamics 68

Figure 5.8: Responses to Q17 69

Table 5.9: Factors that could improve the diversity climate – Group dynamics 69

Table 5.10: Organisational effort/ initiatives 70

Table 5.11: The diversity climate – Management support 70

Figure 5.9: Responses to Q15 71

Figure 5.10: Responses to Q23 71

Table 5.12: Factors that could improve the diversity climate – Management support 72

Table 5.13: Organisational effort/ initiatives 72

Table 5.14: The diversity climate – Training and development 73

Figure 5.11: Responses to Q18 73

Table 5.16: Organisational effort/ initiatives 74

Table 5.17: The diversity climate – Policies and procedures 75

Table 5.18: Factors that could improve the diversity climate: Policies and procedures 75 Table 5.19: Organisational effort/ initiatives 76

Table 5.20: Knowledge sharing in the banking sector 76

Table 5.21: Correlation between individual experiences and knowledge sharing 78

Figure 5.12: Relationship between Q12 and Q27 79

Figure 5.13: Relationship between Q14 and Q27 80

Table 5.22: Correlation between group dynamics and knowledge sharing 81

Table 5.23: Correlation between management support and knowledge sharing 82

Table 5.24: Correlation between training and knowledge sharing 82

Table 5.25: Correlation between formal initiatives and knowledge sharing 83

Table 5.26: Barriers to Knowledge sharing 83

Table 5.27: Enablers of knowledge sharing 84

Table 5.28: Personal career outcomes 85

Figure 5.14: Responses to Q40 86

Table 5.29: Interview results: Personal Career outcomes 87

Table 5.30: Compliance to legislation: Human Resource Development 88

Table 5.31: Skills and competency transfer 89

Table 5.32: Process efficiency 90

Table 5.33: Increased competitiveness 91

Table 5.34: Work environment 92

C HAPTER 7 Figure 7.1: Model depicting the linkages between business enablers and business outcomes 111

GLOSSARY

Authority, has a responsibility to enhance the skills and competence of employees within the sector, by supporting and facilitating skills development strategies

Psychological Contract Rousseau (2004a) defines the psychological

contract as beliefs, based upon promises expressed or implied, regarding an exchange agreement between an individual and, in organizations, the employing firm and its agents The belief by employees that a future return has been promised by the employer creates certain expectations amongst employees These expectations could be extrinsic in nature or in the form of career development

Organisational Citizenship The key elements shared by various definitions

of Organisational Citizenship behaviour is that it:

̇ Represents behaviour above and beyond those formally included in the organisational contract

̇ Is discretionary in nature

̇ Is not directly or explicitly rewarded

Is important as a contributor to organisational effectiveness (Netemeyer, Boles, McKee and McMurrian, 1997)

Customer Life-Time Value This refers to the profitability that could be

derived from a customer, if the customer remains with the organisation for his/her entire life

obtained

listed from the smallest to largest response

C HAPTER 1

D EFINITION OF THE R ESEARCH P ROBLEM

1.1 Introduction

‘The challenge facing South Africa today is for managers to harness the richness

of many ethnic groups so as to enhance productivity and facilitate global competitiveness’ (Thomas and Bendixen, 2000)

As South Africa takes its place in a geopolitical landscape, it is confronted with new and better global opportunities, and a world that is characterised by a plethora

of networks, where technical and human links continually change (Esterhuyse, 2003) However, transformation which is described as a ‘strategic response to the condition in which an organisation [or country], cannot continue functioning as before’, (Levy and Merry, 1986, ix), has a two-fold connotation for a country such

as South Africa

If South Africa were to be contextualised within the United Nations Development Programme hierarchy of indicators for transformation, see Appendix 1, one would find a country anxious to attain a state of ‘International Comparability’, while simultaneously building its young democracy, and transforming the economy away from its legacy of racial discrimination and national domination (United Nations Development Programme, 2000) In this regard, it becomes imperative that the

‘Community, Provincial and National level’ transformation be prioritized within the short-term, before a sustainable global presence is sought According to Msweli-

Mbanga and Potwana (2005), ‘the system of democracy cannot be confined at the political level For democracy to survive, it must occur and function in all social and economic organisations including the workplace’ To this end the South African government has attempted to create employment opportunities, empower the historically oppressed and remove discrimination in the workplace (United Nations Development Programme, 2000), by passing several Acts These include the Employment Equity Act of 1998, the Skills Development Act of 1998, the Promotion of Equality and Prevention of Unfair Discrimination Act of 2000, and the Black Economic Empowerment Act of 2003 In addition, charters have been conceded to, that govern the various sectors within the South African economy This includes the Financial Sector Charter (FSC) that attempts to address past disparities (National Treasury, 2003), particularly in the areas of Procurement, Ownership, Corporate Social Responsibility, Access to Finance, and Human Resource Development

These local interventions, coupled with the emerging trends of globalisation, mean South African businesses are faced with the immense challenge of transforming themselves to be reflective of the post-apartheid South Africa, while remaining competitive within the global marketplace

Perez and de Pablos (2003) argue that given the intensity of competition and the unprecedented rate of technological change in the current entrepreneurial environment, tangible assets in terms of physical and financial capital, can no longer provide a sustainable competitive advantage It is intellectual capital or

‘people-embodied know-how’ that distinguishes leaders in the market (Prahalad,

1983) Prahalad and Hamel (1990) later added that the ability to build on the inherent value of these intangible assets constitutes a core competency for organisations, particularly those providing financial and professional services As such, in the words of Ulrich (1991), ‘given the fact that employee knowledge, skills and abilities constitute one of the most significant and renewable resources which

a company can take advantage of, the effective management of this capital now has greater importance than ever’

1.2 Motivation for research

Within the South African context, the effective management of intellectual capital comes with inherent challenges Firstly, the new operating reality includes a diverse workforce, particularly in terms of cultural and ethnic backgrounds Given that there is empirical support for the fact that culturally diverse work teams are able to attain higher levels of profitability than their culturally homogenous counterparts, there is a ‘need for organisations to espouse a comprehensive approach to valuing diversity’ (Ng and Tung, 1998, p992) According to Burgess (2002), the remnants of apartheid are still evident in the way that ‘people of different races continue to live essentially separate lives’ (p5)

The second challenge is that the South African government has identified the shortage of suitably skilled labour as the single biggest threat to the successful implementation of the Accelerated and Shared Growth Initiative for South Africa (Asgisa) (I-Net Bridge, 2006) This however, is not a recent development It is an

issue that has its roots in the country’s history of racial separation, and has been the focus of many discussions in recent years

Sello Moloko, who is at the helm of the Association of Black Securities and Investment Professionals (Absip), and who has played a key role in the drafting of the Financial Sector Charter, asserts that this country will not be able to achieve sustainable higher growth without skills People who can operate on the ground are required, and at present, the financial sector [in particular], has not made a great deal of effort in skills development New ways to accelerate skills must be sought (Louw, 2005) Absip Deputy President, Nomkhita Nqweni, reaffirmed this statement by declaring that for meaningful transformation, and sustainable economic empowerment, financial institutions need to focus on pillars of empowerment related to internal transformation, such as people and skills development An enabling environment needs to be created to allow inexperienced professionals to grow in their organisations, and thereby progress to senior and executive levels (Bridge, 2005)

A study conducted by the Absa Bank Group in 2002 found that the unemployment rate in the country, which was already around 40 percent, was increasing by 1.8 percent per year One of their primary recommendations in counteracting these conditions, was that a sharp increase in skills and productivity levels was needed (Van Tonder, 2002) Freeman (2006) contends that ‘while there are political sensitivities about bringing highly skilled emigrants and retirees back into mainstream employment in South Africa - because these will more often than not

be white people - there is a growing realisation that this is a critical step in

accelerating and sustaining economic growth’ He further adds that this is not meant to undermine black economic empowerment initiatives, but rather to

‘harness whatever high-end skills and resources are available to us to uplift the broader base of the population’ (p1)

Rijamampianina and Maxwell (2002), declare that it has become a critical managerial objective that new employees be integrated into the mainstream business, and that the skills of existing, lower-level employees be developed, as a priority, to enable the broad spectrum of cultural groups to function together in a cohesive and productive manner To this end, the sharing of knowledge and experiences that veteran employees have acquired over time, is key to bridging the skills and competency gap that could exist within a diverse workforce, that still bears the effects of past educational disparities In so doing, it was Robert (2000, p429) who suggested that social and cultural influences must be taken into consideration before such initiatives are promulgated He contends that knowledge sharing will be more successful when ‘it is between agents who share common social, cultural and linguistic characteristics It will be less effective when agents are from diverse backgrounds, particularly in the early stages of interaction Over time though, they will develop an appreciation of their partner’s social context Together they will establish their own social norms and expectations of one another, thereby enabling the successful exchange of knowledge’

There are two business imperatives that emerge as a result of the above The first

is that organisations need to inculcate a climate that supports diversity (Morosini, 1998), as early as possible and at every juncture A workforce that reflects an

increase in the number of women, minority groups, individuals with ethnic backgrounds, ageing employees, and people from different cultures, will need to work together towards common organisational goals despite their diversity (Dutton, 1998)

The second imperative emanates from Koskinen (2003), who states that although the success of an organisation may accrue from either explicit (codified) or tacit (personal) knowledge, many organisations do not sufficiently understand this

‘bipartite nature of knowledge’, and as such ‘attention is often directed on codified material only The fact that a great deal of the know-how required in implementation of a task is tied to knowledge that is not written, is not taken into consideration as a whole’ (p67) When employees retire or leave the organisation, this knowledge is permanently lost

The sharing of tacit knowledge in particular is paramount as approximately 70 percent of what an employee needs to know to do his or her job successfully is learned outside of formal training (Kaplan, 2002) A survey conducted by The Delphi Group revealed that there is a clear understanding across industries that the tacit knowledge base can account for as much as 75% of an organisation’s collective knowledge The study also found that on average, organisations believe 42% of corporate knowledge is housed exclusively within the brains of employees (Kothuri, 2002) Figure 1.1 indicates the proportion of tacit versus explicit knowledge typically characteristic of any organisation Tacit knowledge has become a strategic asset that is relevant to sustaining business performance and overall competitiveness (Pathirage, Amaratunga and Haigh, 2005)

Figure 1.1 – Tacit versus explicit knowledge

According to Prahalad and Hamel (1990), Financial Services is one of the more knowledge-intensive sectors This sector, within the South African context, is thus the primary focus of the study Despite its reliance on knowledge, a lack of skills is still one of the key challenges facing the industry on a daily basis, according to the South Africa Banking Survey 2004 In particular, the attraction and retention of skilled staff, shortage of skills in respect of previously disadvantaged groups, the standards of skills and the continuous process of upgrading staff skills are the

In the face of these challenges, have banking institutions in South Africa identified the business imperatives that have emerged, and if so, how effective have they been in creating a climate that supports diversity and the transfer of tacit knowledge?

Source: Adapted from Bartholomew (2005)

1.3 Research Problem

This study thus sets out to assess the diversity climate within each of the participating financial institutions and establish whether:

1 Employees within the financial sector in South Africa will perceive the

diversity climate within their organisations positively

2 A positive diversity climate is a mediating factor in ensuring more effective transfer of tacit knowledge in organisations

3 The sharing of tacit knowledge and skills within a diverse workforce will result in more positive career outcomes for the individual

4 Positive career outcomes resulting from the transfer of tacit knowledge, will produce tangible and intangible benefits for South African financial institutions

The final outcome of this research is the derivation of a conceptual framework, which depicts the linkages between these variables

The following terms have been used interchangeably within this research paper:

̇ Knowledge-sharing and knowledge transfer (this refers specifically to tacit knowledge)

̇ Financial sector and banking sector

̇ Survey and questionnaire

̇ Question and statement

Chapter 2 reviews literature that is relevant to the variables being explored within this research

2.1.2 Industry challenges and drivers of transformation

• Market share and the competitive environment

The industry is relatively concentrated in terms of market share of assets, but not out of line with other developing nations (National Treasury and South African Reserve Bank, 2004) The highly competitive environment is exacerbated by the entry of foreign and niche banks, and increased commoditisation of service offerings This implies that the traditional ways of conducting business may not be

effective, and thus new business models need to be developed to provide a competitive advantage (Arevuo, 2003)

• Labour market and productivity

While the banking sector mirrors global trends in reducing the number of employees, productivity levels need to be increased There is a growing need for highly skilled people, particularly in specialised areas of the bank (BANKSETA, 2004) The high levels of unemployment and poverty in the country, coupled with the growing impact of the HIV/AIDS pandemic, further exacerbate the shortage of skilled labour and hinder broader participation of economically active individuals within the mainstream economy (Lehutso-Phooko, 2004) This impacts directly on the profitability and competitiveness of the financial sector The sector is unable to exploit the demographic dividend offered by a relatively young population structure (Lehutso-Phooko, 2004)

• Legislative environment

The banking sector is highly regulated, with the Financial Sector Charter being one

of the most significant compliance issues This charter is a commitment to Black Economic Empowerment (BEE) within the financial services sector It establishes mechanisms for BEE, by setting targets in the categories of Human Resource Development, Procurement, Access to Financial Services, Empowerment Financing, Ownership and Control, and Corporate Social Investment The signatories believe the Charter will be a key driver of sustainable growth, redressing social and economic inequalities in South Africa, while providing a sound policy framework for the future development of the industry It is hoped that the Charter will underpin sound business practice, as well as maintain the strength

and stability of the financial sector (Banking Council of SA, 2004) Compliance is one of the key drivers of transformation within the industry

- The negative implication of organisational change is that employees naturally feel insecure for fear of job loss Within such a context, it becomes difficult to encourage a culture of knowledge-sharing (Trudell, 2002)

- Arevuo (2003) stated that financial service companies tend to view money as the ‘panacea for a multitude of problems’ (p2), therefore the assumption is that

if employees do not embrace knowledge-sharing, building in a financial incentive would produce the desired behaviour However, he contends this is but a short-term solution In addition, Arevuo (2003) stated that organisations within this sector reward and recognise individual achievement as opposed to team performance

- Tacit knowledge is intangible and often embedded within the minds of people

As a result, it is relatively unexplored and not fully understood (Pathirage, Amaratunga and Haigh, 2005) The tendency is therefore, to focus on explicit knowledge, as the transfer thereof is highly visible and can be easily measured

2.2 Improving organisation strategic performance

According to Higgins (2005), the significant changes occurring so frequently within the business environment, necessitates the adjustment or change of strategies more so than in the past Changes in strategy do not occur in isolation; it is essential therefore to ensure that the other key organisational factors are aligned

to the strategy This has become a tremendous challenge to many organisations Higgins (2005) proposes an ‘eight S model’, described in Table 2.1, that builds on the McKinsey ‘seven S model’

In improving ‘Strategic Performance’, Higgins (2005) posited that the other seven elements need to be perfectly aligned However, he acknowledged that this is often not the case, primarily due to change leaders either not recognising the need for alignment to the strategy, or because they do not fully understand the implications of this required alignment According to Kaplan (2005), economists and business strategy scholars tend to focus on the more tangible and measurable hard “S’s” of strategy, structure and systems The other intangible, more difficult-to-measure soft “S’s” are usually regarded as social sciences (p42)

Table 2.1: Eight ‘S’ Model

Strategy and

purposes

Corporate strategy, which defines the business that the organisation is

in, and how it intends conducting that business, usually changes as the organisation’s strategic purpose changes The latter includes the strategic intent, vision, mission, goals, focus

Structure This consists of five parts namely, the jobs itself, the authority to do

those jobs, the grouping of jobs in a logical fashion, the manager’s span of control and mechanisms of coordination According to Higgins (2005), while the first four are depicted within an organisational chart, the fifth is usually housed within the operating policies and procedures Systems and

processes

These enable an organisation to get things done on a daily basis, for example, information systems and performance measurement systems

Style This refers to the consistent pattern of behaviour exhibited by leaders

in interacting with employees

Staff Matching the number and type of employees with the individual and

group competencies as required by the organisation

Resources The extent to which the organisation has adequate resources to

achieve its strategy These include people, technology and financial capital Knowledge management and organisational learning can be fund within this realm

The body of literature presented in the subsequent sections, will explore two arguably unquantifiable concepts, namely, the diversity climate, and the sharing of tacit knowledge within a diverse workplace

2.3 Diversity defined

As predicted in the study Workforce 2020, rapid technological change, globalisation, the demand for skills and education, an aging workforce, and greater ethnic diversification within the labour market have permanently transformed the employment landscape (Lockwood, 2005) The change in the cultural make-up of organisations has made managing diversity a critical competency (Cox, 2001) This assertion can be applied to Corporate South Africa, as not only is the country considered to be one of the most culture-rich, but unique in that various cultures are striving to form a unified South African culture, as opposed to merely co-existing (Finestone and Snyman, 2005) It has therefore become imperative for leaders and supervisors to understand diversity and how it can affect their organisations

In defining diversity, Cox (2001), proposes that the term is neither so broad as to imply any difference between people, nor is it so narrow as to be limited to merely dimensions of race and gender He states that ‘diversity is the variation of social and cultural identities among people existing together in a defined employment or market setting’ (p3) Moon (1997) declares that although diversity comprises traits

on varying tiers, it is the primary dimensions including age, gender, ethnicity, race, and physical abilities that shape a person’s self image and fundamental world

view, and therefore have the most impact on groups in the workplace Lockwood (2005) provides a broader perspective, which maintains that diversity represents a company’s fundamental attitude that it not only respects and values the individuality of its employees, but it also understands how to tap the potentially significant contributions inherent in diversity

Cultural diversity, as a subset, has been defined as the ‘representation in one social system, of people with distinctly different group affiliations of cultural significance’ (Moon, 1997, p9) It is essentially about differing values, beliefs, norms and traditions that exist among members of groups (Schauber, 2001) Cultural diversity in the workplace is now going beyond its narrow scope, with an emerging paradigm being integration and learning The latter implies that companies value cultural differences to the extent that they could leverage off the talents of all employees to gain diverse work perspectives (Lockwood, 2005) Given that managing individuals of diverse backgrounds has become an operating reality within organisations, there is extensive literature declaring that businesses are sensitised to the fact that a diverse workforce can extend their capabilities in terms of innovation and sustained competitiveness (Hart, 1997; Cox, 1991; Cox and Blake, 1991; Ng and Tung, 1998; Lockwood, 2005) As such, this is a reality that organisations choose to manage more effectively

Cox and Blake (1991) propose that the act of managing diversity refers to a variety

of management issues and activities This is illustrated in Figure 2.1

Figure 2.1 – Spheres of Activity in the Management of Cultural Diversity

Source: Cox and Blake, 1991, p46

The three spheres of activity that fall within the ambit of this study include, managing the mindsets about diversity, managing cultural differences, and heterogeneity in race or ethnicity In conjunction, these allude to the management

of the diversity climate within the organisation, which is the focus of the following section

2.3.1 The Diversity Climate

The diversity climate is defined as organizational members’ attitudes and perceptions toward people from cultural groups other than their own Within an organisation that attempts to influence the nature of their diversity climate, it is these attitudes and perceptions that are manifested in practices and behaviours

HR Managemen Mind-sets

about

Organisatio

n

that get acknowledged, supported and rewarded The diversity climate is an integral part of, albeit only a subset of the organizational culture (Schauber, 2001)

As a point of departure, although the terms culture and climate are often used interchangeably and indiscriminately (Hicks-Clarke and Iles, 2000), this research does make a distinction between the two, and the focus is primarily on organisational climate In defining these terms, there are vastly opposing perspectives that have come to the fore While Schneider, Gunnarson and Niles-Jolly (1994), contend that the ‘climate is one aspect of culture’, where climate is

‘the atmosphere that employees perceive is created in their organisations by practices, procedures and rewards’ Culture is described as ‘referring to the broader pattern of an organisation’s values and beliefs’ (Hicks-Clarke and Iles,

2000, p325) Burke and McKeen (1992) shared this view, but suggested that climate should have a context within the organisation, such as a climate for diversity

Earlier proponents on the subject including Tagiuri (1968) and Anderson (1982) propose that climate is a general dimension that encompasses culture, with the latter being merely one sub-dimension The implication is that climate is broader and more far-reaching than culture, and includes the total environmental quality within the organisation (Hicks-Clarke and Iles, 2000) This discussion will adopt

the definition as distinguished by Schneider et al, with the focal point being the

diversity climate

2.3.1.1 Impact of diversity on individuals, groups and organisations

Research has been conducted to assess the diversity climate, and its influence on minority groups and organisational outcomes Schneider and Reichers (1983) contend that the climate provides a context that can influence employee behaviour and attitudes, and is essentially grounded in perceptions Kossek and Zonia (1993) investigated the perceptions that academic employees held, about the diversity climate at a United States, public sector university Their findings include the fact that hierarchical level within the organisation, ethnic background and gender affect the individual’s perception of the diversity climate They further advocate that if organisations and individuals are to rid themselves of prejudices, it

is necessary to ‘break down the barriers between groups’ The extent of equal opportunity policies, access to resources and opportunities in the workplace, and more importantly how these efforts are viewed by individuals and groups, can positively or negatively impact on the prevailing climate (Hicks-Clarke and Iles,

2000, p326) Hicks-Clarke and Iles (2000) were of the opinion that the research conducted by Kossek and Zonia (1993) was restrictive, in that the respondents were all highly qualified and belonged to one American University In addition, the paper did not delve into individual and organisational outcomes that could emanate by examining the diversity climate

Hicks-Clarke and Iles (2000) attempted to expand their research and in so doing address some of the weaknesses of the Kossek and Zonia (1993) work Their main focus was to conceptualise only those factors that were relevant to creating a positive diversity climate, and that would affect individual level outcomes, and their attitudes and perceptions towards the organisation Although they were aware of

the possible linkages between the latter and organisational performance, this was not explicitly proven within the ambit of their investigations Figure 2.2 outlines their derived Climate for Diversity model

Figure 2.2: Climate for Diversity Model

Source: Hicks-Clarke and Iles, 2000, p330

Their conclusions were that a positive climate for diversity (as indicated by perceptions of policy support, organisational justice, support for diversity, and recognition for the need for diversity) is strongly related to the presence of positive organisational, job and career attitudes They found that gender, management level and ethnicity influence the diversity climate, organisational commitment and job satisfaction, as perceptions differ across these dimensions Hicks-Clarke and Iles (2000) were proponents of the significance of diversity policies and procedures in developing a positive climate for diversity The latter is one aspect in cultivating an inclusive organisational environment

DEPENDENT VARIABLES

Organisational Commitment Job Satisfaction

Career Planning Career Commitment Satisfaction with Manager Career Satisfaction Career Future Satisfaction

MODERATING VARIABLES

Gender Age Ethnicity Marital Status Domestic care responsibilities Disability

Management Level Work Hours (F/T or P/T)

Need for Diversity

Support for Diversity

Source: Hicks-Clarke and Iles, 2000, p330

A shortcoming with this model is the lack of attention paid to achievement outcomes, which relates to how well the individual performs in the organisation (Cox, 1993) The focus was primarily on individual attitudes and perceptions about their work and employer, or affective outcomes In addition, there was no direct link established between policy support by the organisation (perceived to be equitable), and how this would translate to a tangible benefit to the organisation The work of Virick, Goswami and Czekajewski (2004) merits citation, as it builds

on the model proposed by Hicks-Clarke and Iles (2000)

Virick et al (2004) considered demographic diversity and its impact on the

perceptions of diversity climate They concluded that it was not sufficient to have formal policies in place The effectiveness of the latter from the perspective of minority employees needed to be evaluated Their argument was that minority employees form perceptions of the overall diversity climate within the organisation, based on how effective they perceive diversity programmes and initiatives to be

As a point of departure, Virick et al contend that minorities are more likely to have

lower trust and lower organisational commitment, which inadvertently makes it necessary to investigate whether the intended beneficiaries are in fact deriving any

benefits from formal diversity initiatives

There have been several earlier researchers who have attempted to empirically establish relationships between diversity factors and individual and organisational outcomes These include Ng and Tung (1998) who examined the relationship between ethno-cultural diversity and attitudinal and non-attitudinal measures of

organisational performance A framework relating workgroup diversity to organisational performance has been postulated This is depicted in Figure 2.3

Figure 2.3: Framework relating Workgroup Diversity to Organisational Performance

Source: Ng and Tung, 1998, p982

Although their research was conducted within one Canadian bank, the study provides empirical support for the fact that culturally diverse work teams are able

to attain higher levels of financial profitability than their culturally homogenous counterparts Their paper does not point to mediating or mitigating factors that could influence the diversity climate Ng and Tung (1998) however, acknowledge the ‘need for organisations to espouse a comprehensive approach to valuing diversity’ (p992) They found that ethno-cultural backgrounds impact on how individuals view the attitudinal measures such as job satisfaction and job involvement, which is consistent with the later findings of Hicks-Clarke and Iles (2000)

• Job satisfaction

• Job involvement

• Organisational commitment

Ely and Thomas (2001) focus specifically on the impact of cultural diversity on

work group functioning They confirm that this relationship is influenced by the

group’s diversity perspective, which they define as the ‘group member’s normative

beliefs and expectations about cultural diversity and its role in their work group’

(p234) It follows that if the diversity climate is defined as organizational members’

attitudes and perceptions toward people from cultural groups other than their own

(Schauber, 2001), then these two concepts are very closely aligned Both allude to

the manner in which diversity is managed in the organisation, and can be

positively or negatively impacted by organisational factors The difference lies in

the fact that the diversity climate refers to how a group member perceives others

The diversity perspective, is about how the member expects to be treated by the

group Figure 2.4 depicts these causal relationships

Figure 2.4: Relationship between Cultural Identity Diversity and Work Group Functioning

Source: Ely and Thomas, 2001, p236

Source: Ely and Thomas, 2001, p236

Without delving into a detailed account of their research, they propose that there

are three types of diversity perspectives namely integration and learning, access

DIVERSITY IN

CULTURAL

IDENTITIES

WORK GROUP FUNCTIONING

WORK GROUP DIVERSITY PERSPECTIVE

INTERMEDIATE GROUP OUTCOMES

• Quality of Intergroup Relations

• Degree of feeling valued and respected

• Meaning and significance of cultural identity at work

and legitimacy, and discrimination and fairness Within the context of these diversity perspectives, members of culturally diverse work groups are able to relate to one another in a manner that influences the members’ sense of how much others in the group value and respect them, which has ramifications for the group’s capacity to learn and adapt to change Ely and Thomas (2001) argue that although all three perspectives have been successful in motivating employers to diversify their workforce, it is only the integration and learning perspective that provides the guidance needed to achieve sustained benefits from diversity Organisations that adopt the integration-and-learning perspective view cultural diversity as a valuable resource that could be leveraged to review even its most basic tasks As employees could openly discuss their different points of view, there are increased opportunities for cross-cultural learning, which enhances group work and their effectiveness

Rijamampianina and Maxwell (2002) used the works of Ely and Thomas (2001) to

assert that management operating out of the integration-and-learning perspective believe that diversity is desirable because of its inherent value ‘which should be harnessed in general management and strategic planning within the organisation’ When employees of diverse backgrounds sense that they are involved in decision making activities, they are sharing in the affective outcomes (Cox, 1993) associated with greater involvement, and they acknowledge that the probability of sharing in the ‘tangible rewards of organisational success’ is increased (Rijamampianina and Maxwell, 2002, p4)

An early proponent of the benefits of a positive diversity climate, Cox (1993) provided a conceptual model, depicting the impact of diversity on overall organizational effectiveness This is represented in Figure 2.5

Figure 2.5: Interactional Model of Cultural Diversity

Source: Taylor Cox & Associates Inc., 1993

Affective Outcomes

̇ Job/career satisfaction

̇ Organisational identification

̇ Job involvement

Achievement outcomes

̇ Job performance ratings

̇ Compensation

̇ Promotion/Horizontal

̇ Promotion/Horizontal Mobility rates

ORGANISATIONAL EFFECTIVENESS

He advocates that if one is to improve the diversity climate, there are three sets of factors that need to be managed namely individual, group and organisational level factors The assertion made is that if individuals of diverse backgrounds feel sufficiently valued and respected within their work environment, then this will translate into positive career outcomes Human (1996) confirms this within the South African context, where she posits that ‘managing diversity requires situational adaptability and communication skills which affirm the value of diverse people and which communicate positive expectancies Such affirmation, in turn, can create the optimal conditions for effective co-operation and performance’ (p61)

Of particular relevance to this research, is the element of informal integration that Cox (1993) declares is required on an organisational level to improve the diversity climate This refers to the impact of social networks and mentoring activity on advancing an employee’s development and career progression By introducing mentoring within his interactional model, Cox (1993) acknowledges the relationship between knowledge and skills transfer and managing diverse individuals This will be the focus of the following section

2.4 Organisational Knowledge

The Oxford English Dictionary presents the word ‘knowledge’ as meaning

‘acknowledging, recognising, inquiring, being aware, understanding, intelligence, information acquired through study and learning’ According to McInerney (2002),

‘knowledge is based in sentient beings, or emanates from them’ As such this

construct is dynamic, ‘always changing with the human experience’ (p1010) Within an organisational context, work-related activity depends to a large extent on personal interactions with others and as such, knowledge has both an active and a social dimension (Brown and Duiguid, 2000) It is these knowledge-based interactions that have been posited to be a source of competitive advantage for organisations (Perez and de Pablos, 2003; Prahalad, 1983), as knowledge in itself has been viewed as capital, specifically intellectual capital Figure 2.6 schematically depicts the components that in aggregate form the organisational knowledge base

Figure 2.6: Ontological Diagram of Organisation Knowledge

Declarative Knowledge

Technical Elements

• Skills

• how

Know-based media Nonaka (1991) views this type of knowledge as being ‘objective and rational knowledge that can be expressed in words, sentences, numbers and formulae’, and thus is commonly referred to as codified knowledge Bhardwaj and Monin (2006) contend that knowledge management systems (KMS) have effectively captured explicit knowledge through the use of technology, however, there is a ‘significant portion of organisational knowledge that is embedded in the organisational processes and embodied in people’ that still eludes standard KMS The question that is being asked is, ‘given the present direction that technological developments are taking, would there be any technology in future that would be able to reach the innermost recesses of the human mind where tacit knowledge resides?’ (p72) There is a need to therefore, increase the focus on tacit knowledge

2.4.1 Tacit knowledge defined

Much of the knowledge used to succeed in work and life is acquired implicitly without the intention to learn or even the awareness that learning has occurred (Leonard and Insch, 2005).The phrase ‘tacit knowledge’ was coined to represent the fact that ‘we know more than we can tell’ (Polanyi, 1966, p4) He posited that tacit knowledge cannot be articulated and can only be expressed through actions Sternberg, Wagner, Williams and Horvath (1995), followed a similar pattern of thought, in that they defined tacit knowledge as action-oriented knowledge, acquired without direct help from others, and which allowed individuals to achieve goals that they personally value As such, environmental support did not feature as

a requisite to acquire tacit knowledge